From the FT last week:
A big rise in borrowing through index-linked and long-dated government bonds would be the most effective action the Treasury could take to help hard-pressed defined benefit pension schemes, according to the industry's trade body.
In its submission to the Treasury ahead of next week's pre-Budget report, the National Association of Pension Funds said that 80 per cent of its members saw an increase in the issuance of long-dated and inflation-linked gilts as the government measure that would most help its members.
Pensions experts say protecting schemes against adverse market moves requires the purchase of long-dated and index-linked gilts, since these move in line with pension fund -liabilities.
Because demand for ILGs is so great and issuance so limited, however, inflation-adjusted yields on index-linked debt are lower than those for many other forms of government borrowing. "Even higher yields would represent extremely good value for the government," the NAPF said.
So please do not tell me there is no demand for government debt in the economy, or that it is bad news for the UK.
I made this point months ago on the Jeremy Vine show on BBC Radio and people sounded baffled by it. Good to know I was right.
And as the baby boomers steadily retire there is just one thing we can be sure of: the demand for government debt is going to increase. Which means it’s a good job the government is going to be increasing the supply of it.
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That is an extremely perverse argument. For a start the annual value of private pension contributions comes nowhere near the £200 billion of net gilt issuance, so we can assume that demand for gilts from pensioners is easily satisfied from current supply.
Of course pensioners would be happy to see more issuance, because more issuance means lower prices/higher yields for the holders, but there is no reason to dump costs on future generations simply for the sake of providing reliable assets for today’s pensioners.
I’m surprised that you are advocating more debt, rather than – as Taleb and Buiter are both advocating – taking a new look at equity using forms other than the conventional, dysfunctional and often distinctly iniquitous Joint Stock Limited Liability Company form.
It is not necessary for the public sector to borrow to invest when they may use trust or partnership frameworks to create public equity instead.
Alex
As ever, no one knows but you….
Richard
Chris
Unrealistic
I’ve told you time and again LLPs cannot be sued for the purpose you desire because the admin of tax to have everyone in the country engaged in them would be a nightmare
And the state does not issue debt through limited companies
It is not a PLC
Richard